Amazon plans big screen Kindle: Textbook margins are the real aim not saving newspapers

Amazon plans big screen Kindle: Textbook margins are the real aim not saving newspapers

Summary: Updated: Amazon will reportedly unveil a new large-screen Kindle Wednesday. The company just scheduled a press conference for Wednesday at 10:30 a.

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TOPICS: CXO, Amazon
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Updated: Amazon will reportedly unveil a new large-screen Kindle Wednesday. The company just scheduled a press conference for Wednesday at 10:30 a.m. in New York City at Pace University. Get the subtle hint?

Despite that subtle hint---holding a press conference at a university (textbooks people!)---a lot of folks are missing the big picture of these large screen Kindles (Techmeme). A bevy of outlets are talking about how big screen Kindles will save the newspaper industry (as if we're all married to reading broadsheets). The New York Times writes:

Now the recession-ravaged newspaper and magazine industries are hoping for their own knight in shining digital armor, in the form of portable reading devices with big screens. Unlike tiny mobile phones and devices like the Kindle that are made to display text from books, these new gadgets, with screens roughly the size of a standard sheet of paper, could present much of the editorial and advertising content of traditional periodicals in generally the same format as they appear in print.

That's true, but let's put away the knight in shining armor analogies already. It' only natural that the New York Times would write about the Kindle saving its own tail. The reality: If Amazon is going to save the newspaper and magazine industry it will just be a side effect on the way to tackling a much bigger market: The college textbook industry, which carries some meaty margins. 

The stats tell the tale:

  • The National Association of College Stores (NACS) reckons students spend $750 a year at their campus store. 
  • An average of $488 was spent on new and used course materials (textbooks). The average price of a new textbook was $57 and a used one was $49. 
  • Multiply that $488 a student by the college enrollment of 17.7 million folks and you get a textbook market of about $8.6 billion or so. 

Now let's put those figures in perspective. The market caps of the New York Times, Gannett and the Washington Post come to a little more than $5.2 billion. And that figure is widely inflated because the Washington Post owns Kaplan, the SAT prep company that carries the entire business. 

Simply put, if Amazon really wanted to save the newspaper industry Jeff Bezos would just buy those aforementioned companies, spin off Kaplan and put the news gathering operations in a non-profit foundation.

Bezos and his Kindle are going after the inefficiencies here. 

The data, courtesy of the NACS Foundation, illustrates Amazon's opportunity. More than 32 cents of your textbook dollar goes to paper, printing and edit costs. Toss in freight and a third of your textbook dollar goes to stuff that can be eradicated with a Kindle. 

Meanwhile, the textbook margins are pretty good. All Amazon has to do is blow up the textbook market and capture some of those profits. 

Do you need a used book market?

There are a few talkbacks below wondering about the used book market and whether Amazon would need one. I don't buy it. Here's why:

Say you buy a textbook for $100. Our resident student Zack Whittaker reckons he'd get maybe $50 at best when he sells the book back. So here's the math:

  • You buy text book for $100;
  • You're out of $100 for a semester;
  • You sell the textbook back for $50;
  • You're out of $50 total, but your cash flow was gone for a semester. That money could have been spent on better things (beer?). 

Now what if Amazon charges you $35 for a textbook. Your upfront cost is $35, there are no lines for returning the book and you keep it. Even without a used book market you come out ahead. 

Overall, the used textbook market may be a lot like thinking you get a deal when you get a tax return. In reality, you're just loaning money to someone for a few months and happy when the institution gives some of it back.

Topics: CXO, Amazon

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Talkback

79 comments
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  • DRM for textbooks?

    I just signed up for a Grad level course, the textbook was going to be about $160. I found an international version for about 1/3 that cost. Would I have saved all this money using a kindle, or would it have the DVD equivalent of region coding?

    Also I don't know how Kindle books work currently, but can I sell it back, or to someone else, as used?
    gtvr
    • Good questions

      On the DRM I'm not sure folks will care if the textbook prices fall enough. On the used book market that's an interesting question. If I recall you don't recoup much on the used sale anyway relative to new. But indeed, a secondary e text market would be interesting.
      Larry Dignan
      • Plus, how would this work for...

        I recall in grad school often having several text books open at once on my desk as I wrote my thesis, worked on projects, and studied. How would you keep multiple things open at once for quick glances between them?
        BillDem
        • You've seen Deep Space 9?

          They have little computer called PADDs, lots of them. You'd obviously have to buy several kindles!
          bobharvey
          • It's off to a good start

            Compare it to the early iPod, not a bad start at all, and cheaper:
            http://www.techcrunch.com/2009/02/03/is-the-kindle-outpacing-early-ipod-sales/
            oncall
        • alt-tab (nt)

          (nt)
          pdf6161
        • Make a hard copy

          Just make a hard copy of the pages you need. Use your computer to print a page, or however many pages you need from as many texts as you need.

          And hey, you can always reuse the back of the paper as grocery notes or some such before you send it all back to the recycler when you`re finished with all those notes.

          bart001fr
          • Spawn a hard copy market?


            With flexible plastic displays coming, I can see a near future where these could be made into cheap, reusable, "printed" materials. Then just wipe and reuse them when done like white boards. You could have stacks of these lying around, and erasing and "printing" them might be as simple as touching them against your future eReader or smartphone.

            Paper printing might only be used for creating long-term easy reference materials.
            HeadScratcher7
      • RE: Amazon plans big screen Kindle: Textbook margins are the real aim not saving newspapers

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      • RE: Amazon plans big screen Kindle: Textbook margins are the real aim not saving newspapers

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    • Overseas "DRM"

      I can tell you that Amazon and ITunes (and Netflix streaming too)
      prevent purchase of copyrighted material outside the US. I can't
      download anything even if I want to pay for it. I suspect this answers
      your question. And as well, my students, if they were aware, could buy
      some texts at a lower price if they went to a Korean bookstore. There are
      pricing differences (hence DRM and coding and/or IP address blocks).
      john_e_fish
    • Overseas

      I can tell you that Amazon and ITunes (and Netflix streaming too)
      prevent purchase of copyrighted material outside the US. I can't
      download anything even if I want to pay for it. I suspect this answers
      your question. And as well, my students, if they were aware, could buy
      some texts at a lower price if they went to a Korean bookstore. There are
      pricing differences (hence DRM and coding and/or IP address blocks).
      john_e_fish
  • RE: Amazon plans big screen Kindle: Textbook margins are the real aim not s

    What happens when the student wants to sell his/her used
    textbook? Are the textbooks going to be rentable, for say
    a semester? How much of a savings is there going to be
    over a conventional book? If this thing this is anywhere
    close to the price of the current Kindle, it won't sell.

    If Amazon can't answer these questions reasonably, then
    students are not going to buy. The publishing industry
    would love this, they won't have to deal with the used book
    industry anymore. What's better than selling the same
    thing over and over, while making the same margins on
    every book?

    And to cap it all off, these things will be laced with DRM.
    Jeff Christiansen
    • Re-read the article

      Especially the part about how, even without the option to re-sell it, it is still cost effective.
      raelalt
    • Textbook resale

      Naw.

      I've un-fond memories of trying to make back some cash by selling
      my textbooks while in college.

      The slightest revision to the text means your book is valueless. And
      the publishers revise the text as often as possible.

      I recall taking in eight textbooks: they accepted ONE.

      So while I'm not sold on e-textbooks, the resale argument is a dodo.


      What we should be looking for is a helper app that can snip and
      annotate the electronic textbook as well as swap between different
      textbooks quickly.

      If you could, for example, record your own voice, or the teachers'
      voice, annotating a section of text, it would help with memorization.
      Jkirk3279
      • An intelligent response...

        ...and excellent ideas. I hope someone with the power to implement your ideas is reading this blog's TalkBack. Unfortunately, you most likely will not benefit financially from your excellent ideas...unless you create your own company with a competing product (at half the price) with the features you envision. To that end, I also hope some angel investors or venture capitalists are reading this TalkBack...with interest in your ideas.
        Isocrates
  • RE: Amazon plans big screen Kindle: Textbook margins are the real aim not saving newspapers

    In the UK at least it is perfectly normal to buy the text books second hand at the start of the year, and flog them on at the end. This costs the student around 5% of buying them outright. There are whole stores devoted to this in university towns.

    How exactly would this work with ebooks? I am prepared to bet that the T&C and copy protection schemes would conspire against it.

    This idea is in no-one's interest except the publishers and the device manufaturers. Don't fall for it kids!
    bobharvey
    • Wich I had gone to school in the UK

      As both an undergrad and a grad student, there was little to choose from off the shelf in used books. Many professors wanted a different book from the year before and/or the publisher put out a "new edition" that we had to buy instead of using the last semester's text.
      Marketing@...
    • Re-selling text books

      I'm in my fourth year of paying for my son's university education. Every semester they change the textbooks and required readings so as to eliminate the used textbook market. He doesn't even have the option of buying used books in almost every one of his classes. Maybe in the UK there isn't such a blatant collusion between schools and text book publishers, but here (at least in California) it is way out of control.
      raelalt
    • Copy protection??

      Egad!

      Just go to your friendly computer sciences student and have him crack it so you can resell the book at the end of the year.

      You might even be able to ask the full price you paid for that ebook.

      What I'm more interested in is the price they'll ask for the big screen Kindle itself.
      Probably a 4-year mortgage.

      bart001fr